[Reporter’s Notebook] The Jeonse Crisis Tangled Like a Ball of Yarn

[Asia Economy Reporter Je Moon-won] The government and the ruling party are expected to announce additional measures to alleviate the jeonse (long-term lease) shortage as early as the 11th. Although the government has drawn a line by stating that "nothing has been confirmed" regarding related reports, the announcement of the measures seems to be only a matter of time. Due to successive regulations, the domestic real estate market has already become distorted and scattered like a tangled skein, surpassing the level where it can recover on its own over time.

When measures are introduced to stabilize the real estate market, side effects cause housing prices to rise, and when follow-up measures are announced to curb this, side effects occur again, causing market instability. However, the government appears unable to easily break free from this cycle. Since it has neither reversed the accumulated regulations nor devised a solution that only addresses the side effects, concerns arise in the market whenever the government reviews new measures.

The upcoming measures will be no different. According to sources inside and outside the government, the follow-up measures will focus on having public institutions such as the Korea Land and Housing Corporation (LH) purchase or lease vacant houses and supply them as jeonse. Since the government is looking for ways to increase jeonse supply in the short term while maintaining existing regulations such as the new lease law, the market expects that the only option will be to increase supply by injecting government funds.

However, structurally, it is difficult to supply a large quantity of high-quality housing through purchase leases. Because public institutions receive purchase applications mainly for multi-family and multi-unit houses, buy them at appraised prices, and then supply them as jeonse, it is hard for houses in good locations that middle-class residents want to live in to become available. Popular apartments have even stricter purchase requirements, including purchase price, maintenance fees, and location conditions.

An industry insider said, "Even if landlords put their houses on the market, many are expected to be in suburban areas or villas." Jeonse lease programs are also designed for low-income groups, and considering the significant public budget burden, their effectiveness is limited. On the 6th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, indirectly expressed the difficulty of presenting effective short-term measures by saying, "If there were definite measures, the government would have already announced them."

Untying a knot is harder than tying it. The more the government regulates and suppresses the market, the bigger and more complicated the knot becomes, making it all the more difficult to restore the market to its original state. This is why it is dangerous to easily introduce measures without considering the market's functions. Nevertheless, the ruling party is moving in a direction of regulation only, recently proposing a bill to extend the lease period to 6 years. It is even questionable whether there is any will to untangle the skein.

This content was produced with the assistance of AI translation services.